(“-1 l .1 , ‘I -¢ LEE iN s91 MARCH 195s Economic Considerations in Storing Grain Sorghum in Central Texas "it TEXAS AGRICULTURAL EXPERIMENT STATION 19 ~45 mafia" - R. D. LEWIS, DIRECTOR, COLLEGE STATION, TEXAS Summary Central Texas farmers take a chance of obtaining less net returns if they store their grain sorghum on their own account (not under Commodity Credit Corporation loan) rather than sell it at harvest. The 10-year average seasonal price increase from August to the following March (most favorable month for sale from storage on the average) was slightly more than the cost of storage for the 7-month period on grain that did not require artificial drying for safe storage. When drying was necessary. the total cost slightly exceeded the average price increase. However. the CCC loan-price support program tends to “iron-out" the seasonal increases in price on which returns to storage depend in a “free" market operation. f ha.» With the present price support program. most producers are interested in whether to sell at harvest or store under CCC loan. If the net price a producer can obtain by forfeiting the grain is more than the harvest market price, it pays to put grain in storage under CCC loan. If not, he will be taking a chance of loss by doing so. This study gives details for computing the net support price on which the decision should depend. If grain sorghum is put in storage under CCC loan and the market price rises above the net support price plus costs of redeeming the grain as the marketing season advances, the farmer can profit by redeeming the grain and selling it on the market. The study provides the necessary information for com- puting the “break-even" market price at any time during the season. Contents Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Returns to Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . ._ Storage Costs . . . . . . . . . . . . . L . . . . . . . . . . . . . . . .V_. . ; ,- Drying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uniform Storage . . . . . . . . . . . . . . . . . . . . . . . . . .._' Loan Handling. f . . . . . . . . . . . . . . . . . . . . . . . . .. In-and-out Charge . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . To Sell or Store on Farmer's Own Account. . . . . .“ Stored Safely without Drying . . . . . . . . . . . Dried for Safe Storage. . . .. . . . . Storage Returns and Price Support. . . . . . .; To Sell or Store under CCC Loan. . . .. . . . . . . ...'.? To Forfeit or Redeem from CCC Loan . . . . . . . ; . . Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 HIS STUDY IS CONCERNED WITH ECONOMIC COH- , siderations that may be useful to the Central exas farmer in deciding whether to store or sell v== grain sorghum at harvest. The three main i; isions are: (1) whether to sell at harvest or ore in commercial elevators under his own ac- unt (not under Commodity Credit Corporation in) for later sale, (2) whether to sell at harvest t store in commercial elevators under CCC loan d (3) whether to redeem the grain from CCC n for market sale or forfeit it to the govern- ent. , The present study for Central Texas is similar F» that reported in Texas Agricultural Experi- ent Station Bulletin 868, Seasonal Price Change ‘ d Costs 0f Storing Grain Sorghum in the oastal Bend. The Central Texas study involves ‘mputing costs and returns to storage when the ‘rvest month is August rather than in June and ‘ly—as in the Coastal Bend area--and includes alyses for grain stored without artificial dry- g, Returns to Storage »; If the farmer is operating on his own account, t under the CCC loan, the storage returns to “ain produced for market sale are the amount ~ which prices later in the season exceed the rvest price. The price data used for this alysis are based on unpublished but reported id-month farm prices for grain sorghum in the 7- ghth Crop Reporting District of Texas, sup- ied by the Division of Agricultural Estimates, DA. Grain prices generally may be less in qntral Texas than those reported for the Eighth .p Reporting District because of the greater tance from, and cost of transporting grain to, ystal shipping points. However, the seasonal f=ttern is similar and the price margins between rrvest and later months would be about the me. . The study applies to that area of Central ;: as, Figure 1, where the bulk of the grain w ghum is harvested in August. The marketing a iod istaken as beginning in the harvest month, ending the following May—-just before new- '- harvest of grain sorghum in the Coastal nd area. i Farmers in Central Texas who harvest in s gust usually are faced with a depressed market 1 to heavy supplies at that time. The average ygust price was lower than the average of any 8x01400112’ éansidarations in Storing Grain Sorghum in Central Texas CLARENCE A. MOORE, Assistant Professor Department of Agricultural Economics and Sociology other month for the 10-year period 1946-47 through 1955-56, Figure 2. Prices tend to strengthen after August and on into the following May. a The selling price of grain sorghum at harvest usually is quoted on a 15 percent moisture-con- tent basis. Since the grain must be dried to 13 percent or less for safe storage in commercial elevators, prices later in the season are for 13 percent grain. Thus, 100 pounds of 15 percent grain at harvest becomes only 97.7 pounds of grain if dried and sold from storage later in the season. Price marginsbetween harvest and later months in Table 1 are computed for two situa- tions. If the grain is harvested at 13 percent, no adjustment is made in the harvest price, since the same weight of grain is involved whether it is sold at harvest or later. If the grain is har- vested at 15 percent or more, the quoted selling price at harvest is divided by .977 to obtain a harvest price for an equivalent amount of 13 percent grain sold later. For example, Table 1 shows that grain har- vested at 13 percent would have averaged 11 cents more per 100 pounds in September than in August during the 10-year period 1946-47 through 1955- 56. Grain harvested at 15 percent, with the average August price converted to a 13 percent \ Approximate August §\ harvest area q-Q Boundary of crop reporting district eight l v 1 - - ¢ u Figure 1. Approximate area o! study. 2.70 A 2.60 g - 3 5 E 2.50 __ S 5 E g 2.110 __ E E5 Z 2.30 _ 3 E‘. 2.20 __ 2.10 _ o I I l I _ l New crop harvest _ begins in the Coastal Bend Area Average seasonal margin of 47 cents between August harvest price and May price I l l l_ I I Aug- Sept . Oct . Nov. w Dec . Figure 2. Seasonal change in grain sorghum price, Eighth Crop Reporting District, Texas, 1946-47 through 1955-56. _:~ vveight basis, would have averaged 6 cents more 1n September than in August. I Greatest returns from storage could have been obtained in May if the grain had been sold from storage consistently in one particular month dur- ing this period. Returns to storage would have averaged 42 to 47 cents per hundred pounds for grain sold in May and 40 to 45 cents for grain sold in March. V’ TABLE 1. AVERAGE SEASONAL INCREASE IN PRICE OF GRAIN SORGHUM AFTER AUGUST, EIGHTH CROP REPORTING DISTRICT, 1946-47 THROUGH 1955-56 First Second . 5-year period 5-year period III-Year period Month Unad- Ad- Unad- Ad- Unad- Ad- justed‘ justedZ justedl justed? justed‘ justed” — — — Cents per IUU pounds — — — September 11 6 12 6 11 6 October 27 22 12 6 19 14 November 26 ' 21 21 . 15 23 18 December 28 23 31 25 29 24 Ianuary 4U 35 3U 24 35 . 3U February 26 21 33 27 29 24 March 5U 45 4U 34 45 4U April 49 44 35 29 42 37 May 5U 45 45 39 47 42 ‘Margins that apply to the iarmer harvesting grain at 13 per- cent moisture content or less which can be saiely stored without artificial drying. No adjustment was required in the quoted harvest price. “Margins that apply to the iarmer harvesting grain at 15 per- cent moisture content or greater which required artificial drying ior safe storage. An adjustment was made in the quoted harvest price in order to obtain a price equivalent to 100 pounds of 13 percent grain. 4 Feb, 1hr. Apr . May June July ' Seasonal margins Were somewhat greater 3 the late Forties than in the Fifties probably r cause of the stronger loan-support program in i. Fifties. ’ Storage Costs The farmer’s cost of holding grain sorgh a in commercial storage includes all the charge he incurs that could be avoided if he had sold t grain at harvest. Five charges should be c0 sidered in determining the total cost. Drying Since grain sorghum is sold at harvest on a . percent moisture-content basis, the cost of dry’, from 15 to 13 percent should be included cost to storage. Drying charge above 15 perch is not included, since grain is price-doc (usually 5 cents for each percent of moist above 15) when sold at harvest. There is no u. ing charge for grain harvested at 13 perc or less. a ' Uniform Storage This includes the cost of storing, insur' conditioning and care of grain in storage. amount charged is that allowed under the form Grain Storage Agreement. The rate . .047 cent per bushel per day, or about 2.5 c per 100 pounds per month. 1 Loan Handling . If the grain is put in storage under CCC l there is a 1 cent charge per 100 pounds s» executing the loan papers and other CCC 0_ expenses. _ * 1 nil-out Charge > The charge for receiving the grain at the ator was 7.25 cents per bushel, and for load- out, .75 cent per bushel—a total of 8 cents A, bushel, or slightly less. than 14.3 cents per i pounds. If grain under CCC loan is forfeited, government pays the in-and-out charge, but if eemed from CCC loan the farmer pays the jrge. I ~ rest , If CCC loan grain islredeemed, the farmer g st pay 3.5 percent interest on the loan to the " - of repayment. If the farmer stores the grain f his town account, not under the CCC loan gram, interest is a cost if he must borrow yids to finance storage or if he uses his own and, by so doing, foregoes opportunity to i those funds elsewhere at a profit. However, finances the storage himself with funds that uld otherwise be idle during the storage period, rest should not be charged to the storage ration. To Se|| or Store on Farmer's Own Account l‘ If the farmer is operating on his own account ‘thout regard to the CCC loan program, his > ision to sell or store at harvest depends on i. ether the returns from storage will more than Over his costs, columns 5 and 6 of Table 2. TABLE 2. FARMER'S COST OF STORING GRAIN SORGHUM IN COMMERCIAL ELEVATORS IN CENTRAL TEXAS. 1956 Cost of storing grain under CCC loan‘ C°st °n grain not in CCC loan? Month If forfeited ' Ifredeemeda Not dried Dried Not dried Dried Nddried Dried Cents per 100 pounds September 19 25 18.5 24.5 17.9 23.9 October 19 25 21.6 27.6 21.4 27.4 November 19 25 24.8 30.8 25.0 31.0 December _ 19 25 27.9 33.9 28.5 34.5 Ianuary 19 25 31.1 37.1 32.1 38.1 February 19 _ 25 34.3 40.3 35.7 41.7 March 19 25 37.3 43.3 39.1 45.1 April 40.9 46.9 42.7 48.7 May 44.5 50.5 46.2 52.2 ‘Assumes the grain is stored about the middle of August and costs are those accumulating to the middle of subsequent months under the various conditions of storage. 2Includes interest at 6 percent assuming grain valued at $2 per 100 pounds. that is. a 1 cent charge per month for inter- est. . 3Grain sorghum in CCC must be redeemed before March 31 or forfeited to the government. Therefore interest is charged at 6 percent in April and May rather than the 3.5 percent on the government loan. Two cost-returns situations are involved: (1) grain harvested at 13 percent moisture content or less does not require artificial drying for storage, and the farmer obtains the quoted market price if it is sold at harvest and (2) grain harvested at over 13 percent moisture content must be artifically dried for safe storage. ? , ; i» - *- 7 °°::.::::r;di"g . / .3° _ s! % . / % % é z f‘ Returns / .10 ¢ ; - ¢ g % / . Z % f 0 A / ¢ A Sept. “Oct. Nov. . Dec. Jan. Feb- Mar- 4P1" May Figure 3. Average seasonal margins between August and later prices compared with storage cost for gram sorghum ed safely without artificial drying. U1 TABLE 3. STORAGE‘COST AND ANNUAL PRICE CHANGES FOR GRAIN NOT ARTIFICIALLY DRIED BEFORE STORIN 1946-47 THROUGH 1955-56 - Seasonal price change from August by years Month Cost _ j 1946-47 1947-48 1948-49 1949-50 1950-51 1951-52 1952-53 1953-54 1954-55 1955- ' — — — — — — — — — Cents per 100 pounds — — — — — — — — l, September 17.9 —17 43‘ 22‘ U 5 17 27‘ 35 2 14 v October 21.4 411 521 281 10 5 271 18 14,1 20 -5 November 25.0 4 67‘ 41‘ 4 13 51‘ 14 —2 23 2U December 28.5 —56 99‘ 48‘ 9 4U‘ 69‘ 16 3 31‘~ 34‘ " Ianuary 32.1 —47 110‘ 50‘ 16 69‘ 72‘ 16 19 0 44‘ - February 35.7 —44 40‘ 36‘ 29 68‘ 72‘ 12 17 9 52‘ , March 39.1 0 91‘ 40‘ 43‘ 75‘ 76‘ 8 38 31 4,8‘ ‘ April 42.7 1a 991 s7 as s11 801 -s 471 -5 i91- May 46.2 22 89‘ 43 32 65‘ 80‘ ——9 39 42 1‘ ‘Price increase greater than storage cost. Stored Safely without Drying month. The average annual returns were 6 cen_ . . per 100 pounds above costs for consistent salesi Assuming the grain sorghum could have been March . stored safely Without drying during the 10-year ' i A period, the line in Figure 3 represents the average The farmer with grain that could be stor excess of prices later in the season over prices safely without drying could have profited 1 in August (the harvest price) or the returns that storing in every year of the 10-year period -, could have been obtained by selling consistently he sold at the right time, Table 3. In 1946- from storage in any one particular month. The the October price was 41 cents above the Augu bars in Figure 3 represent the cost of storing and price, more than sufficient to cover the 21.4 cenfl handling the grain. Profits could have been made storage cost for that month. Had he sold in u from consistent sale each year in January, March other month that year, however, he would ha or May under the conditions specified. The lost money from storage. In 1947-48, each of t , greatest profit potential Was for consistent sale subsequent monthly prices was sufficiently high from storage in March, as indicated by the height than the August harvest price to more than cov of the returns line above the cost bar for that costs of storage, but the most profit could ha E; “O '_ g / <" Ziiigiiviudin; é r % / interest-“ I 2 ’ 2 2 E BO - I 2 / / a - 2 2 2 2 2 1-22222>2 2 ~44 1° ' 2 2 2 2 2 2 2 2 2 2 2 2 2 2 10- - % ‘ fi/é % % % % 22222 2 2 0 __ % _ // / é that requires drying for sate storage. 6 4v .. made by selling in January—returns 0f per hundred pounds against 32 cents cost. A-The table shows that the farmer, facing the g age cost-price situation on which the study ‘sed, would have made a profit in 6 of the 10 ‘rs by selling in either March or December, ,would have lost money in 4 years. The pro- i would have been less from December than J March sales, over the 10-year period. The farmer could have profited from storage ost years if he had predicted the month that e would be highest. However, it is advisable dopt a policy of consistent selling in the month , shows most favorable over a long period, he studies demand and supply conditions f is Willing to gamble on predicting the price , ement during a particular season. ‘d for Safe Storage Costs of storage are increased by the amount ‘the drying charge; returns to storage, in the of margins between harvest and later prices ‘an equivalent amount of grain, are not as h for grain that must be dried. Figure 4 compares the average costs and re- i s on grain dried for safe storage. The cost drying from 15 to 13 percent was computed ‘,6 cents per 100 pounds. y. At no time did the average returns exceed the of storage including interest. The average urns exceeded costs of storage with no interest trge in only 1 month (March). The farmer i ld have lost money had he consistently stored __j~ sold from storage in any one particular ' th during the period studied and under the ‘ itions specified. He would have lost less by _'ng consistently in March, but would have fited most by selling his grain at harvest g er than by storing. ..,Table 4 shows the farmer could have profited ,6 of the 10 years had he selected the right ‘nth in which to sell. Profits could have been in 5 of the 10 years by consistent selling in January, or in 4- of the 10 years by consistent selling in December, April or May. Although profits were possible in only 3 of the 10 years from March sales, the higher profits in those 3 years combined with smaller losses in the other 7, made March the most favorable month for con- sistent sales from storage-—less loss would have been incurred from March sales. Storage Returns and Price Support _The farmer who stored on his own account, not under the CCC loan-price support program, would have obtained small (if any) returns from storage operations in recent years unless he had predicted accurately annual changes in price. Considering the risk and uncertainty involved, it probably would have been more profitable to sell at harvest if the CCC loan-price support program had not been an alternative. With the program in effect, not many farmers have stored on their own account. The price support program probably has af- fected the relative returns to storage. Over a period of years in a free market, without price support, the difference between the harvest price and later prices is expected to cover the cost of- - storage. Since many farmers sell their grain at harvest, some by necessity and others to avoid the uncertainty of later prices, the heavy supply put on the market at harvest, with little going into storage, unduly depresses the price at harvest. Most of the grain is sold at harvest so there is less to sell later in the season. The price is bid up for this lighter supply as the season advances, Figure 5. Greater seasonal price margins result. The price support program changes the situa- tion. A~ good part of the grain is induced into storage at ‘harvest under CCC loan because the farmer can obtain immediate cash and because the support level, if effective, is more favorable than the market price at harvest. Less grain put on the market at harvest keeps the price higher. A larger supply of grain available for sale from CCC storage later keeps prices from 3 4. STORAGE COST AND ANNUAL PRICE CHANGES FOR GRAIN SORGHUM ARTIFICIALLY DRIED BEFORE STORING. ' 1,. 1946-47 THROUGH 1955-56 g, Seasonal price change from August by years gnth Cost _ ’ 1946-47 1947-48 1948-49 1949-50 1950-51 1951-52 1952-53 1953-54 1954-55 1955-56 — — — — — — — —— — Cents per 100 pounds — — — — — - — — — 23.9 —23 37‘ 17 — 1 12 20 —1 -3 10 27.4 35‘ 46‘ 23 6 1 22 11 —7 - 15 -9 31.0 . —2 61‘ 36‘ 0 9 46‘ 7 -8 18 16 34.9, h- —62 93‘ 43‘ 5 36‘ 64‘ 9 -3 26 30 39.1?! —53 104‘ 45‘ 12 65‘ 67‘ 9 13 -—5 40‘ 41.7 —50 34 31 25 64‘ 67‘ 5 11 4 48‘ 45.1 —6 85‘ 35 39 71‘ 71‘ 1 32 26 44 48.7 7 93‘ 32 32 57‘ 75‘ —-13 41 —10 55‘ 52.2 16 . 83‘ 38 28 61‘ 75‘ —16 33 37 67‘ r S a increase greater than storage cost. ’l N0 SIIPPIIRT HARVEST - __ LATER - . - . - . . . - . - - ~ . - - .- - - - . -- ---¢- STORAGE WITH PRICE SllPPllRl HARVEST Figure 5. Effect of an effective price support program on the seasonal pattern of prices. rising as high as they otherwise would go as the season advances. Thus, the seasonal margin be- tween harvest and later prices (the returns t0 storage) are not expected to be as great under the CCC loan-price support program as under a “free” market situation, Figure 5. To Se|| or Store under CCC Loan In recent years, and probably in the future, the question faced by most Central Texas producers is not whether to sell at harvest 0r store on their own account, but whether to sell or put the grain in storage under CCC loan. The farmer needs to know the price-support base for his coun- ty, the costs of storage and the market price of grain sorghum at harvest. Since the price-sup- port base varies from county to county, depending on transportation costs to Gulf ports, this section explains how to compute the costs and prices on which the decision is based. The farmer can then insert the actual cost and price data which are relevant in his locality to determine whether he should sell at harvest or store under CCC loan in any particular year. The farmer who harvests grain at 13 percent moisture content or less can deduct from the base support price in his county the storage costs to the March 31 forfeit date plus the 1 cent per 100 pounds loan handling charge on grain put in 8 storage under CCC loan. The resulting figure the net loan he can obtain from CCC, and w comes the net price he receives for the gra should it be forfeited to the government. T ; net support price can be compared directly Wit the harvest market price. If the net support pri is more than the harvest market price, it wou, pay to store under CCC 103112,. If the net suppo price is less than the harvest market price, will be taking a chance of loss if he decides - store rather than sell. ‘ As an example, column 1 in Table 2 shows 4% storage costs from August to the March 31 fo Q date, plus the 1 cent loan handling charge, We‘ about 19 cents per 100 pounds on grain that c0 _ be stored under CCC loan without drying. this 19 cents is deducted from the base supp price, the resulting figure is the net loan he . obtain on the grain; if the grain is forfeited, becomes the net price he receives for his gra. If the farmer harvests grain at 15 perc moisture content (or above), he incurs a dry’ charge if he stores under CCC loan. Since a c0 mon charge for drying grain from 15 to 13 =1 cent moisture content was 6 cents (3 cents I 1 percent of moisture), this was added to t storage and loan handling charge in column f of Table 2. The farmer who harvests grain at. percent moisture or above must deduct 25 ce from the base support rate for his county order to obtain a net support price for the gr _ if it is forfeited. f In the preceding paragraph, only drying c for reduction of moisture from 15 to 13 perc is included, although the cost figures are giv‘ as applying to grain harvested at 15 percent _ greater. The analysis is based on the quo harvest market price for 15 percent grain ¢ the farmer who brings grain to market w. moisture content greater than 15 percent is pri docked if he sells his grain at harvest—the c" mon rate was 5 cents less than the quoted p , for each percent of moisture above 15 perc This dockage presumably covers both the dry” charge and loss in weight on grain above p. percent moisture. » However, the net support price on g " harvested at 15 percent moisture content, cl puted by deducting the 25 cents storage, l handling and drying charge from the base s, port price, should be compared with the ha g selling price divided by .977 (to account for f difference in weight between 15 and 13 per, grain) to determine which is the best price the grain, the net support price or the ha 5 market price. ' An example illustrates the computation.” the farmer’s county support rate is set at’; the farmer should deduct the 25 cents sto ’ costs from this rate (approximately 18 c uniform storage charge to March 31, plus t cent loan handling charge, plus 6 cents d t » charge). This gives a net price of $1.75 per 100 pounds of 13 percent grain which he can receive if he later forfeits t0 the government. If the market price is $1.75 for 15 percent grain, the market price is better than the net support price since 100 pounds of 15 percent grain, if dried t0 13 percent, becomes only 97.7 pounds (there would be less grain to put in storage under the CCC loan rate). By dividing the $1.75 market price by .977, he finds that the going market price for an equivalent amount of CCC stored grain is approximately $1.79 per hundred pounds. The market price in this case is greater than the net support price. A harvest price of $1.70 on 15 “jPGPCGDlZ grain divided by .977 gives a price of "i $1.74 for an equivalent amount of 13 percent grain and would mean more could be made by storing under CCC loan. To Forfeit or Redeem from CCC Loan Under the government’s loan-price support program the farmer may forfeit the grain to the i; government and retain the net support price or " redeem the grain by paying off the loan before , the forfeit date. The farmer has the necessary information available to determine which would be the most profitable at any particular time dur- f ing the marketing season. This section deals with the computation neces- » sary to determine at any one time whether the _ market price is sufficiently high to justify re- deeming the grain. The information necessary is the net price support, the costs that could be A avoided if the grain were forfeited but would be ; incurred if the grain were redeemed (the redeem- ing costs) and the market price at that time. The farmer may, at any time as the season if advances, add to his net loan price (discussed in > preceding section) the costs he would incur if he redeemed the grain at that time, and compare the results with the current market price. If the current market price is more than the net loan price plus redeeming costs, it would be more pro- ‘fitable to redeem the grain and sell it on the market. If the current market price is lower, it would be more profitable to forfeit the grain. The redeeming costs are the uniform storage charge, interest to date of repayment of the CCC i loan and the receiving and loading out charge. The uniform storage charge is deducted from l the” base support rate in order to get the net loan I which CCC makes on the grain. (The farmer can 1 get the full amount of the loan by presenting a 5i warehouse statement indicating such charge has " been paid in full ito, forfeit date. It is more convenient to let CGG deduct it and make the net loan since the net price to the farmer is the same , in either case and should he redeem the grain, he saves some interest.) If the, farmer forfeits the a grain, the government is responsible for the astorage charge. If he redeems it, the farmer pays TABLE 5. APPROXIMATE COSTS OF REDEEMING GRAIN SORGHUM PLACED UNDER CCC LOAN IN AUGUST‘ Cost of redeeming grain from CCC loan Month Receiving and 3 4 Total 10a ding out; Interest Storage cost — — —— Cents per 100 pounds — — — September 14.3 .6 2. . 17.5 October 14.3 1.2 5.1 20.6 November 14.3 1.8 7.7 23.8 December 14.3 2.4 10.2 26.9 Ianuary 14.3 3.9 12.8 30.1 February 14.3 3.6 15.4 33.3 March . 14.3 4.2 17.8 36.3 ‘Costs are computed in order to apply to the same day of the following months as that on which grain is put in storage in August. fln-and-out charge was 8 cents per bushel under the Uniform Grain Storage Agreement in 1956. This is slightly less than 14.3 cents per 100 pounds. aComputed at the CCC loan rate of 3.5 percent and assuming the loan rate was $2 per 100 pounds. ‘The Uniform Agreement rate was .047 cent per bushel per day in 1956 which is about .084 cent per day per 100 pounds. only the net loan, plus interest, and thus is re- sponsible for the uniform storage charge. The approximate amount of these costs is shown in Table 5. If the farmer redeemed his grain in November, for example, his costs would be about 24 cents per 100 pounds. If he redeemed it in March, costs would be slightly more than 36 cents. This amount is added to the net loan price to determine the market price required to “break- even” between forfeiting or redeeming the grain. If the farmer computed his net loan support price at $1.75 per 100 pounds of grain and it would cost 36.3 cents to redeem the grain in‘ March, he would have to obtain a market price more than $2.11 ($1.75 + $0.36) in March to profit by redeeming the grain rather than forfeiting. Table 6 shows market prices necessary for the farmer to “break-even” with various net support prices if he redeemed his grain from CCC loan. The market prices must be more than those shown in Table 6 to provide a profit to the farmer who redeems his grain—assuming costs are equal to those shown in the left column based on 1956 charges. For example, if the farmer computes his net support price at $1.70 (Table 6, column 4) and, wants to determine whether the market price Justifies redeeming the grain in January, he would find January and move along the horizontal line of figures until he came to $2.01 in column 4. It would pay him to forfeit his grain and retain the net price of $1.70 unless the market price at that time exceeded $2.01. The analyses in this study were based on the alternative of whether artificial drying was in- cluded as a cost factor, depending on the condition 9 TABLE 6. COSTS TO REDEEM GRAIN FROM CCC LOAN COMPARED WITH “BREAK-EVEN" MARKET PRICES FOR VARIOU NET SUPPORT PRICES ON GRAIN STORED IN AUGUST. Approximate market price required to “break-even" on redeemed grain with a net support price - l" Approximate Month redeeming = costs $1.60 $1.65 $1.70 $1.75 $1.80 $1.85 $1.90 $1.95 $2.00 $2.05 ‘j Gems P“ D 11 100 a - - - - - - I 100 pounds — — — — — — — o ars per poun s l‘ . September 17.5 1.78 1.83 1.88 1.93 1.98 2.03 2.08 k ‘21’ 3 2.18 2.23 1 October 20.6 1.81 1.86 1.91 1.96 2.01 2.06 2.11 2.16 2.21 _ 2.26 November 23.8 1.84 1.89 1.94 1.99 2.04 2.09 2.14 2.19 2.24 2.29 ’ December 26.9 1.87 1.92 1.97 2.02 2.07 2.12 2.17 2.22 2.27 2.32 p Ianuary 30.1 1.91 1.96 2.01 2.06 2.11 2.16 2.21 2.26 2.31 2.36 February 33.3 1.94 1.99 2.04 2.09 2.14 2.19 2.24 2.29 2.34 21$ a March 36.3 1.97 2.02 2.07 2.12 2.17 2.22 2.27 2.32 2.37 2.fl i of the grain at harvest. Many storage units in the area studied do not have drying facilities and many farmers may not have the alternative of artificial drying of their grain before storage. There is greater possibility of deterioration in quality While the grain is in storage if the grain is stored in commercial elevators or Ware- houses above the 13 percent moisture content set as the safe level maximum. Acknow|edgment$ The author expresses appreciation to the fol- lowing people for help in this study: V. C. Childs, 10 statistician in charge of the U. S. Department 0 Agriculture Crop Reporting Service in Texas Jack C. Bradshaw and Tim Moore, Agricultur Stabilization and Conservation State Offic USDA; J. W. Sorenson, Jr., Department of A r cultural Engineering, Texas Agricultural Experi ment Station; Reed S. Hutchison and Dave Calderwood, Agricultural Marketing Servic ‘USDA. - This study was made under the Texas Ag ' cultural Experiment Station’s State Contributi Project to the Southern Regional Cooperativ Grain Marketing Project No. SM-11, “Marketin and Utilization of Grain in the South.” f [Blank Page in Original Bulletin] Location oi field research units oi the Texas Agricultural Experiment Station and cooperating agencies ORGANIZATION OPERATION Research results are carried to Texas farmers, ranchmen and homemakers by county agents and specialists of the Texas Agricultural Ex- tension Service joclay ,5 kedearcA ~95 jomorrowii pPOg/‘Qiifi '21 substations and 9 field laboratories. In addition, there are 14- cooperaf State-wide Research x w .‘ ~ "i . z f’ "k The Texas Agricultural Experiment Statiom is the public agricultural research agency A oi the State oi Texas. and is one oi ten parts oi the Texas AcSM College System IN THE MAIN STATION, with headquarters at College Station, are 16 subj matter departments, 2 service departments, 3 regulatory services and I administrative staff. Located out in the major agricultural areas of Texas : p, stations owned by other agencies. Cooperating agencies include the Te " orest Service, Game and Fish Commission of Texas, Texas Prison Sys ti: U. S. Department of Agriculture, University of Texas, Texas Technologi College, Texas College of Arts and Industries and the King Ranch. S0 __ experiments are conducted on farms and ranches and in rural homes. THE TEXAS STATION is conducting about 400 active research projects, grou H in 25 programs, which include all phases of agriculture in Texas. Amo these are: " Conservation and improvement of soil Beef cattle Conservation and use of water Dairy cattle Grasses and legumes Sheep and goats Grain crops Swine Cotton and other fiber crops Chickens and turkeys Vegetable crops Animal diseases and parasites Citrus and other subtropical fruits Fish and game ’ Fruits and nuts Oil seed crops Ornamental plants Brush and weeds Insects Farm and ranch engineering Farm and ranch business . Marketing agricultural products " Rural home economics Rural agricultural economics Plant diseases Two additional programs are maintenance and upkeep, and central servic, AGRICULTURAL RESEARCH seeks the WHATS, the WHYS. the WHENS. the WHERES and the HOWS oi hundreds oi problems which confront operators oi iarrns and ranches, and_ the many industries depending on or serving agriculture. Workers oi the Main Station and the iield units oi the Texas Agricultural Experiment Station seek diligently to iind solutions to these problems.